Item 1.01 Entry into a Material Definitive Agreement.
On December 5, 2021, Del Taco Restaurants, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Jack in the Box Inc., a Delaware corporation (“Parent”).
Pursuant to the Merger Agreement, and subject to the terms and conditions thereof, a wholly-owned subsidiary of Parent (“Merger Sub”) will merge with and into the Company (the “Merger”), with the Company as the surviving corporation and a wholly-owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), each share of common stock of the Company (“Company Common Stock”) then outstanding will be converted into the right to receive $12.51 in cash, without interest (the “Per Share Merger Consideration”), less any applicable withholding taxes, other than (1) any shares as to which dissenters’ rights have been perfected (and not withdrawn or lost) in accordance with applicable law (which will be cancelled and converted into the right to receive a payment determined in accordance with Section 262 of the Delaware General Corporation Law), and (2) certain non-accelerating restricted stock awards (which will be treated as described below).
The Merger Agreement provides that, at the Effective Time, each of the Company’s then outstanding equity awards will be treated as follows: (1) each unexercised option to acquire Company Common Stock will vest and will be converted into the right to receive cash in an amount equal to the excess, if any, of the Per Share Merger Consideration over the exercise price per share of such option to acquire Company Common Stock multiplied by the number of shares of Company Common Stock subject to such option; (2) each restricted stock award (other than certain non-accelerating restricted stock awards granted to the Company’s named executive officers) will vest and will be converted into the right to receive cash in an amount equal to the Merger Consideration multiplied by the number of shares of Company Common Stock subject to such restricted stock award; and (3) each outstanding performance-based restricted stock unit award will vest and will be converted into the right to receive cash in an amount equal to the Per Share Merger Consideration multiplied by the maximum number of shares of Company Common Stock subject to such performance-based restricted stock unit award. The non-accelerating restricted stock awards will be converted into restricted stock awards with respect to Parent common stock.
The obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of closing conditions set forth in the Merger Agreement, including, among others, (1) the approval of the Company’s stockholders, (2) the expiration or termination of any waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (3) the absence of a “Material Adverse Effect” (as defined in the Merger Agreement) with respect to the Company.
The Merger Agreement contains termination rights for each of Parent and the Company, including, among others, if the Merger has not been consummated by June 6, 2022, which may be extended until September 6, 2022 if clearance under the HSR Act has not been obtained. Upon termination of the Merger Agreement under specified circumstances, generally relating to alternative acquisition proposals or an adverse change in the Company’s board of directors’ recommendation in favor of the Merger, the Company would be required to pay Parent a termination fee of $14.2 million. Upon termination of the Merger Agreement under specified circumstances, generally relating to a failure by Parent to consummate the Merger when required to do so pursuant to the terms of the Merger Agreement, Parent would be required to pay the Company a reverse termination fee of $28.4 million.
Each of the Company, Parent and Merger Sub has made customary representations and warranties and covenants in the Merger Agreement, including covenants to use their respective reasonable best efforts to effect the transaction, including securing required regulatory approvals. In addition, the Company has agreed to other customary covenants, including, among others, covenants to conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and the closing of the Merger.
The Company will be subject to customary restrictions on soliciting or initiating discussions with respect to alternative acquisition proposals and restrictions on its ability to respond to or enter into any agreement with respect to an alternative acquisition proposal, subject to certain limited exceptions to permit the Company’s board of directors to comply with its fiduciary duties. In the event that the board of directors of the Company receives an alternative acquisition proposal that it determines constitutes a Superior Proposal (as defined in the Merger Agreement) in accordance with the terms of the Merger Agreement, the Company may, subject to compliance with requirements to provide notice to and a period for Parent to match
such proposal, payment of the termination fee payable by the Company to Parent described above and other conditions and requirements set forth in the Merger Agreement, terminate the Merger Agreement to accept the applicable Superior Proposal.
In connection with the execution of the Merger Agreement, certain of the Company’s stockholders holding, in the aggregate, approximately 16% of the outstanding shares of Company Common Stock, entered into voting agreements (the “Voting Agreements”) with Parent pursuant to which they agreed, among other things, to vote their respective shares of Company Common Stock in favor of the Merger.
The board of directors of the Company has unanimously determined that the Merger Agreement and the Merger are advisable and in the best interests of the Company’s stockholders, approved the Merger on the terms and subject to the conditions set forth in the Merger Agreement, adopted the Merger Agreement, and resolved to recommend that the stockholders of the Company adopt and approve this Merger Agreement, subject to the right of the board to withhold, withdraw, qualify or modify its recommendation in accordance with the Merger Agreement.
The foregoing description of the Merger Agreement, the Voting Agreements and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement and the Voting Agreements, copies of which are attached hereto as Exhibits 2.1 99.2 and 99.3 are incorporated herein by reference.
The Merger Agreement has been included with this filing to provide investors and security holders with information regarding the terms of the Merger. It is not intended to provide any other factual information about the Company or Parent. The representations, warranties, covenants and agreements contained in the Merger Agreement, which were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts) and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors and security holders. Investors and security holders should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent, or Merger Sub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
